Financing – replenishment of the company’s funds.
Internal sources are formed as a result of the business of the firm. Some of them form the funds remaining from the proceeds after the payment of expenses (the company’s profit). The part of the profit that the owners again invest in the business is called the accumulated (retained) profit. Another source of internal funding is depreciation charges. Depreciation is the cost of replacing worn out equipment, machinery, buildings. These funds are included in the composition of costs and accumulated in a special fund so that at the end of the service life the company has the opportunity to replace the equipment.
External sources of financing are necessary for any, even a fairly successful company, especially when it is just starting its own business or to expand production. In search of them, a company can find additional capital from investors, receive budget funds to support projects important for the state, or finance low-profit, but necessary for the country, industries. Loans can be used as borrowed funds – bank and commercial. A commercial loan is the lending of resources by one enterprise to another on the terms of payment for today’s purchase in the future.
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